MONEYAND POLITICS

Homo sapiens evolved to think of people as divided into us and them. “Us” was the group immediately around you, whoever you were, and “them” was everyone else. In fact, no social animal is ever guided by the interests of the entire species to which it belongs. No chimpanzee cares about the interests of the chimpanzee species, no snail will lift a tentacle for the global snail community, no lion alpha-male makes a bid for becoming the king of all lions, and at the entrance of no beehive can one find the slogan: “Worker bees of the world—Unite!”

But over the last few millennia, Homo sapiens became more and more exceptional in this respect. People began to cooperate on a regular basis with complete strangers, whom they imagined as “brothers” or “friends.” Today, the whole of humankind has become a single network of cooperation. Though even today not all people believe in the same god or obey the same government, they are all willing to use the same money. Osama bin-Laden, for all his hatred of American culture, American religion, and American politics, was very fond of American dollars. How did money succeed where gods and kings failed?

How does money work?

Gold coins and dollar bills have value only in our common imagination. Their worth is not inherent in the chemical structure of the metal or paper, nor in their color or shape. Money isn’t a material reality—it is a mental construct. It works by converting matter into mind. But why does it succeed? Why should anyone be willing to exchange a fertile rice paddy for a handful of useless gold coins? Why are you willing to flip hamburgers, sell health insurance, or babysit three obnoxious brats when all you get for your exertions is a few pieces of colored paper?

People are willing to do such things when they trust the figments of their collective imagination. Trust is the raw material from which all types of money are minted. When a wealthy farmer sold his possessions for a handful of gold coins and traveled with them to another province, he trusted that upon reaching his destination other people would be willing to sell him rice, houses, and fields in exchange for the gold. Money is accordingly a system of mutual trust, and not just any system of mutual trust: Money is the most universal and most efficient system of mutual trust ever devised. Even people who do not believe in the same god or obey the same king are more than willing to use the same money. Osama bin-Laden, for all his hatred of American culture, American religion, and American politics, was very fond of American dollars.

What created this trust was a very complex and long-term network of political, social, and economic relations. Why do I believe in the gold coin or dollar bill? Because my neighbors believe in them. And my neighbors believe in them because I believe in them. And we all believe in them because our king believes in them and demands them in taxes, and because our priest believes in them and demands them in tithes. Take a dollar bill and look at it carefully. You will see that it is simply a colorful piece of paper with the signature of the US secretary of the treasury on one side, and the slogan “In God We Trust” on the other. We accept the dollar in payment, because we trust in God and the US secretary of the treasury. The crucial role of trust explains why our financial systems are so tightly bound up with our political, social, and ideological systems, why financial crises are often triggered by political developments, and why the stock market can rise or fall depending on the way traders feel on a particular morning.

Initially, when the first versions of money were created, people didn’t have this sort of trust, so it was necessary to define as “money” things that had real intrinsic value. History’s first known money— Sumerian barley money—is a good example. It appeared in Sumer around 3000 BC, at the same time and place, and under the same circumstances, in which writing appeared. Just as writing developed to answer the needs of intensifying administrative activities, so barley money developed to answer the needs of intensifying economic activities.

Barley money was simply barley—fixed amounts of barley grains used as a universal measure for evaluating and exchanging all other goods and services. The most common measurement was the sila, equivalent to roughly one liter. Standardized bowls, each capable of containing one sila, were mass-produced so that whenever people needed to buy or sell anything, it was easy to measure the necessary amounts of barley. Salaries, too, were set and paid in silas of barley. A male laborer earned 60 silas a month, a female laborer 30 silas. A foreman could earn between 1200 and 5000 silas. Not even the most ravenous foreman could eat 5000 liters of barley a month, but he could use the silas he didn’t eat to buy all sorts of other commodities—oil, goats, slaves, and something else to eat besides barley.

Even though barley has intrinsic value, it was not easy to convince people to use it as money rather than as just another commodity. In order to understand why, just think what would happen if you took a sack full of barley to your local mall, and tried to buy a shirt or a pizza. The vendors would probably call security. Still, it was somewhat easier to build trust in barley as the first type of money, because barley has an inherent biological value. Humans can eat it. On the other hand, it was difficult to store and transport barley. The real breakthrough in monetary history occurred when people gained trust in money that lacked inherent value, but was easier to store and transport. Such money appeared in ancient Mesopotamia in the middle of the third millennium BC. This was the silver shekel.

The silver shekel was not a coin, but rather 8.33 grams of silver. When Hammurabi’s Code declared that a superior man who killed a slave woman must pay her owner 20 silver shekels, it meant that he had to pay 166 grams of silver, not 20 coins. Most monetary terms in the Old Testament are given in terms of silver rather than coins. Joseph’s brothers sold him to the Ishmaelites for twenty silver shekels, or rather 166 grams of silver (the same price as a slave woman—he was a youth, after all).

Unlike the barley sila, the silver shekel had no inherent value. You cannot eat, drink, or clothe yourself in silver, and it’s too soft for making useful tools—plowshares or swords of silver would crumple almost as fast as ones made out of aluminum foil. When they are used for anything, silver and gold are made into jewelry, crowns, and other status symbols—luxury goods that members of a particular culture identify with high social status. Their value is purely cultural.

Ultimately, anything can be used as money, provided people have trust in it. Today, most money is just electronic data. The sum total of money in the world is about $60 trillion, yet the sum total of coins and banknotes is less than $6 trillion. More than 90 percent of all money—more than $50 trillion appearing in our accounts—exists only on computer servers. Most business transactions are executed by moving electronic data from one computer file to another, without any exchange of physical cash. Only a criminal buys a house, for example, by handing over a suitcase full of banknotes. As long as people are willing to trade goods and services in exchange for electronic data, it’s even better than shiny coins and crisp banknotes—lighter, less bulky, and easier to keep track of.

For thousands of years, philosophers, thinkers, and prophets have besmirched money and called it the root of all evil. In fact, money is also the apogee of human tolerance. Money is more open-minded than language, state laws, cultural codes, religious beliefs, and social habits. Money is the only trust system created by humans that can bridge almost any cultural gap, and that does not discriminate on the basis of religion, gender, race, age, or sexual orientation. Thanks to money, even people who don’t know each other and don’t trust each other can nevertheless cooperate effectively. For whereas religion asks us to believe in something, money asks us to believe that other people believe in something.

Money is an astounding thing because it can represent myriad different objects and convert anything into almost anything else. However, before the modern era this ability was limited. In most cases, money could represent and convert only things that actually existed in the present. This imposed a severe limitation on economic growth, since it made it very hard to finance new enterprises.

If you had a dream to open a bakery, and had no ready cash, you could not realize your dream. Without a bakery, you could not bake cakes. Without cakes, you could not make money. Without money, you could not build a bakery. Humankind was trapped in this predicament for thousands of years. As a result, economies remained frozen. The way out of the trap was discovered only in the modern era, with the appearance of a new system based on trust in the future. In it, people agreed to represent imaginary goods—goods that do not exist in the present—with a special kind of money they called “credit.” Credit enables us to build the present at the expense of the future. It’s founded on the assumption that our future resources are sure to be far more abundant than our present resources. A host of new and wonderful opportunities open up if we can build things in the present using future income.

If credit is such a wonderful thing, why did nobody think of it earlier? Of course they did. Credit arrangements of one kind or another have existed in all known human cultures, going back at least to ancient Sumer. The problem in previous eras was not that no one had the idea or knew how to use it. It was that people seldom wanted to extend much credit because they didn’t trust that the future would be better than the present. They generally believed that times past had been better than their own times and that the future would be worse, or at best much the same. To put that in economic terms, they believed that the total amount of wealth was limited, if not dwindling. People therefore considered it a bad bet to assume that they personally, or their kingdom, or the entire world, would be producing more wealth ten years down the line. Business looked like a zero-sum game. Of course, the profits of one particular bakery might rise, but only at the expense of the bakery next door. Venice might flourish, but only by impoverishing Genoa. The king of England might enrich himself, but only by robbing the king of France. You could cut the pie in many different ways, but it never got any bigger.

That’s why many cultures concluded that making bundles of money was sinful. As Jesus said, “It is easier for a camel to pass through the eye of a needle than for a rich man to enter into the kingdom of God” (Matthew 19:24). If the pie is static, and I have a big part of it, then I must have taken somebody else’ slice. The rich were obliged to do penance for their evil deeds by giving some of their surplus wealth to charity.

If the global pie stayed the same size, there was no margin for credit. Credit is the difference between today’s pie and tomorrow’s pie. If the pie stays the same, why extend credit? It would be an unacceptable risk unless you believed that the baker or king asking for your money might be able to steal a slice from a competitor. So it was hard to get a loan in the pre-modern world, and when you got one it was usually small, short-term, and subject to high interest rates. Upstart entrepreneurs thus found it difficult to open new bakeries and great kings who wanted to build palaces or wage wars had no choice but to raise the necessary funds through high taxes and tariffs. That was fine for kings (as long as their subjects remained docile), but a scullery maid who had a great idea for a bakery and wanted to move up in the world generally could only dream of wealth while scrubbing down the royal kitchen’s floors.

It was lose-lose. Because credit was limited, people had trouble financing new businesses. Because there were few new businesses, the economy did not grow. Because it did not grow, people assumed it never would, and those who had capital were leery of extending credit. The expectation of stagnation fulfilled itself.

Then came the Scientific Revolution and the idea of progress. The idea of progress is built on the notion that if we admit our ignorance and invest resources in research, things can improve. This idea was soon translated into economic terms. Whoever believes in progress believes that geographical discoveries, technological inventions, and organizational developments can increase the sum total of human production, trade, and wealth. New trade routes in the Atlantic could flourish without ruining old routes in the Indian Ocean. New goods could be produced without reducing the production of old ones. For instance, one could open a new bakery specializing in chocolate cakes and croissants without causing bakeries specializing in bread to go bust. Everybody would simply develop new tastes and eat more. I can be wealthy without your becoming poor; I can be obese without your dying of hunger. The entire global pie can grow.

Over the last 500 years the idea of progress convinced people to put more and more trust in the future. This trust created credit; credit brought real economic growth; and growth strengthened the trust in the future and opened the way for even more credit. It didn’t happen overnight—the economy behaved more like a roller coaster than a balloon. But over the long run, with the bumps evened out, the general direction was unmistakable. Today, there is so much credit in the world that governments, business corporations, and private individuals easily obtain large, long-term and low-interest loans that far exceed current income.

The belief in the growing global pie eventually turned revolutionary. In 1776 the Scottish economist Adam Smith published The Wealth of Nations, probably the most important economics manifesto of all time. In the eighth chapter of its first volume, Smith made the following novel argument: When a landlord, a weaver, or a shoemaker has greater profits than he needs to maintain his own family, he uses the surplus to employ more assistants, in order to further increase his profits. The more profits he has, the more assistants he can employ. It follows that an increase in the profits of private entrepreneurs is the basis for the increase in collective wealth and prosperity.

This may not strike you as very original, because we all live in a capitalist world that takes Smith’s argument for granted. We hear variations on this theme every day in the news. Yet Smith’s claim that the selfish human urge to increase private profits is the basis for collective wealth is one of the most revolutionary ideas in human history—revolutionary not just from an economic perspective, but even more so from a moral and political perspective. What Smith says is, in fact, that greed is good, and that by becoming richer I benefit everybody, not just myself. Egoism is altruism.

Smith taught people to think about the economy as a “win-win situation,” in which my profits are also your profits. Not only can we both enjoy a bigger slice of pie at the same time, but the increase in your slice depends upon the increase in my slice. If I am poor, you too will be poor since I cannot buy your products or services. If I am rich, you too will be enriched since you can now sell me something. Smith denied the traditional contradiction between wealth and morality, and threw open the Gates of Heaven for the rich. Being rich meant being moral. In Smith’s story, people become rich not by despoiling their neighbors, but by increasing the overall size of the pie. And when the pie grows, everyone benefits. The rich are accordingly the most useful and benevolent people in society, because they turn the wheels of growth for everyone’s advantage.

We are living in the most peaceful era in history. International wars have dropped to an all-time low. With few exceptions, since 1945 states no longer invade other states in order to conquer and swallow them up. Such conquests had been the bread and butter of political history since time immemorial. It was how most great empires were established, and how most rulers and populations expected things to stay. But campaigns of conquest like those of the Romans, Mongols and Ottomans cannot take place today anywhere in the world. Since 1945, no independent country recognized by the UN has been conquered and wiped off the map. Limited international wars still occur from time to time, and millions still die in wars, but wars are no longer the norm.

Many people believe that the disappearance of international war is unique to the rich democracies of Western Europe. In fact, peace reached Europe after it prevailed in other parts of the world. Thus the last serious international wars between South American countries were the Peru-Ecuador War of 1941 and the Bolivia-Paraguay War of 1932-1935. And before that there hadn’t been a serious war between South American countries since 1879–1884, with Chile on one side and Bolivia and Peru on the other.

We seldom think of the Arab world as particularly peaceful. Yet only once since the Arab countries won their independence has one of them mounted a full-scale invasion of another (the Iraqi invasion of Kuwait in 1990). There have been quite a few border clashes (e.g., Syria vs. Jordan in 1970), many armed interventions of one in the affairs of another (e.g., Syria in Lebanon), numerous civil wars (Algeria, Yemen, Libya), and an abundance of coups and revolts. Yet there have been no full-scale international wars among the Arab states except the Gulf War. Even widening the scope to include the entire Muslim world adds only one more example, the Iran-Iraq War. There was no Turkey-Iran War, Pakistan-Afghanistan War, or Indonesia-Malaysia War.

In Africa things are far less rosy. But even there, most conflicts are civil wars and coups. Since African states won their independence in the 1960s and 1970s, very few countries have invaded one another in the hope of conquest.

There have been periods of relative calm before, as for example in Europe between 1871 and 1914, and they always ended badly. But this time it is different. For real peace is not the mere absence of war. Real peace is the implausibility of war. There has never been real peace in the world. Between 1871 and 1914, a European war remained a plausible eventuality, and the expectation of war dominated the thinking of armies, politicians, and ordinary citizens alike. This foreboding was true for all other peaceful periods in history. An iron law of international politics decreed, “For every two nearby polities, there is a plausible scenario that will cause them to go to war against one another within one year.” This law of the jungle was in force in late nineteenth-century Europe, in medieval Europe, in ancient China, and in classical Greece. If Sparta and Athens were at peace in 450 BC, there was a plausible scenario that they would be at war by 449 BC.

Today humankind has broken the law of the jungle. There is at last real peace, and not just absence of war. For most polities, there is no plausible scenario leading to full-scale conflict within one year. What could lead to war between Germany and France next year? Or between China and Japan? Or between Brazil and Argentina? Some minor border clash might occur, but only a truly apocalyptic scenario could result in an old-fashioned full-scale war between the latter in 2014, with Argentine armored divisions sweeping to the gates of Rio, and Brazilian carpet-bombers pulverizing the neighborhoods of Buenos Aires. Such wars might still erupt next year between several pairs of states, e.g., between Israel and Syria, Ethiopia and Eritrea, or the USA and Iran, but these are only the exceptions that prove the rule.

This situation might of course change in the future, and with hindsight, the world of today might seem incredibly naïve. Yet from a historical perspective, our very naivety is fascinating. Never before has peace been so prevalent that people could not even imagine war.

Scholars have sought to explain this happy development in more books and articles than you would ever want to read yourself, and they have identified several contributing factors. Two among them are particularly important. First, the price of war has gone up dramatically. The Nobel Peace Prize to end all peace prizes should have been given to Robert Oppenheimer and his fellow architects of the atomic bomb. Nuclear weapons have turned war between superpowers into collective suicide, and made it impossible to seek world domination by force of arms.

Secondly, while the price of war soared, its profits declined. For most of history, polities could enrich themselves by looting or annexing enemy territories. Most wealth consisted of fields, cattle, slaves, and gold, so it was easy to loot it or occupy it. Today, wealth consists mainly of human capital, technical know-how, and complex socioeconomic structures such as banks. Consequently it is difficult to carry it off or incorporate it into one’s territory.

Consider California. Its wealth was initially built on gold mines. But today it is built on silicon and celluloid—Silicon Valley and the celluloid hills of Hollywood. What would happen if the Chinese were to mount an armed invasion of California, land a million soldiers on the beaches of San Francisco, and storm inland? They would gain little. There are no silicon mines in Silicon Valley. The wealth resides in the minds of Google engineers and Hollywood script doctors, directors, and special-effects wizards, who would be on the first plane to Bangalore or Mumbai long before the Chinese tanks rolled into Sunset Boulevard. It is not coincidental that the few full-scale international wars that still take place in the world, such as the Iraqi invasion of Kuwait, occur in places were wealth is old-fashioned material wealth. The Kuwaiti sheikhs could flee abroad, but the oil fields stayed put and were occupied.

Prof. Yuval Noah Harari is the bestselling author of Sapiens: A Brief History of Humankind, Homo Deus: A Brief History of Tomorrow, and 21 Lessons for the 21st Century.

Born in Haifa, Israel, in 1976, Harari received his PhD from the University of Oxford in 2002, and is currently a lecturer at the Department of History, the Hebrew University of Jerusalem.

Prof. Harari originally specialized in world history, medieval history and military history.

His current research focuses on macro-historical questions such as: What is the relationship between history and biology? What is the essential difference between Homo sapiens and other animals? Is there justice in history? Does history have a direction? Did people become happier as history unfolded? What ethical questions do science and technology raise in the 21st century?

Prof. Harari is a two-time winner of the Polonsky Prize for Creativity and Originality, which he was awarded in 2009 and 2012. In 2011 he won the Society for Military History’s Moncado Award for outstanding articles on military history. In 2017 Homo Deus won Handelsblatt’s German Economic Book Award for the most thoughtful and influential economic book of the year. In 2018 Prof. Harari gave a keynote speech on the future of humanity on the Congress Hall stage of the World Economic Forum annual meeting in Davos.

Published in 2014, Harari’s book Sapiens: A Brief History of Humankind has become an international hit. By 2018, 10 million copies had been sold and the book was translated into nearly 50 languages. It was listed on the Sunday Times bestseller list for over six months in paperback, and was a New York Times top 10 bestseller. Sapiens was recommended by Barack Obama, Bill Gates and Mark Zuckerberg.

In 2016 Prof. Harari returned with Homo Deus: A Brief History of Tomorrow, a critically acclaimed book that examines the big future projects facing humanity in the 21st century. Within two years, five million copies of the book had been sold
worldwide, and it was translated into nearly 50 languages.

After exploring deep into the past and then the future, Yuval Noah Harari published 21 Lessons for the 21st Century in 2018. Here he stopped to take the pulse of our current global climate, focusing on the biggest questions of the present moment: What is really happening right now? What are
today’s greatest challenges and choices? What should we pay attention to?

Prof. Harari regularly lectures around the world on the topics explored in his books and articles, and has written for newspapers such as the Guardian, Financial Times, The Times, Nature magazine and the Wall Street Journal.

He also offers his knowledge and time to various organizations and audiences on a voluntary basis.

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"What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government."
https://en.m.wikipedia.org/wiki/The_End_of_History_and_the_Last_Man